Aixtron has reported that Q3 2012 equipment orders picked up by 15% sequentially to €34.5m and Q3/2012 revenue increased by 35% sequentially to €62.2m. However, the boost in order intake and revenues during Q3 was not as strong as expected.

Looking at the longer 9-month business period, from January to September 2012, and comparing it with the 2011 equivalent, paints a different picture, with this year’s three quarters’ sales having dropped 68% to €150m (from €471 m), gross profit down to -€17.3m (from €220m) and earnings before interest and taxes (EBIT) down to -€113m (from €129 m).

Aixtron management has therefore reviewed its immediate outlook in relation to the inventories held and concluded that, despite the positive long-term outlook for the LED industry, the existing stock held was inappropriately high in comparison with the current subdued level of demand in the market.

The company stated, “Management has decided to write down €51.5 m of inventories as excess to requirement. As it is now evident that Aixtron will not return to profitability during 2012, the company has now guided towards a 2012 EBIT loss of around €125m, based on likely revenues of €220m for the fiscal year 2012.”

Aixtron’s Q3/2012 gross profit was reported to be -€42.3m, which was significantly lower than in Q2/2012 (€14.7m), due mainly to the inventory write-downs, but also influenced by a less favorable product mix which included a lower level of final customer acceptances and softer pricing on some legacy products.

Despite high MOCVD utilization rates, which have historically been seen as a precursor to an imminent pickup in equipment orders, in the current environment Aixtron said its customers still remain hesitant about adding new LED production capacity. This hesitancy is perceived to be also influenced by the recent highly competitive pricing development in consumer end-markets and the consequent margin pressure on LED makers.

In other end markets, Aixtron has seen its non-LED business gaining further traction throughout 2012. This includes Silicon Semiconductor equipment, with increasing demand for the new QXP-8300 ALD (atomic layer deposition) system, offering a compelling and cost-effective technology solution for memory producers.

Similarly, the company said it is seeing far greater interest from Power Electronics and LED customers in the recently launched AIX G5+ systems, which are optimized for both power electronics devices and gallium nitride on silicon (GaN-on-Si) LED structures. The firm’s recently announced Prodos range of organic semiconductor technology has attracted interest in both the R&D community and amongst the emerging OLED production industry. Aixtron is currently commissioning and qualifying a production system for a major Asian customer.

President & CEO Paul Hyland said he remains confident that Aixtron has the appropriate strategy to capitalize on the next LED-lighting investment cycle and to be able to pursue adjacent growth market opportunities.

For fiscal year 2012, Aixtron expects sequentially stronger fourth-quarter revenues, albeit considerably less than previously expected. However, as a result of the unexpected slower demand recovery, the firm will not report a profit in fiscal 2012. It expects to achieve full-year 2012 revenues of €220m and an EBIT loss of about -€125m.

Management expects to see an increase in demand for manufacturing equipment in 2013, driven by projected stronger equipment demand from the LED general lighting market as well as other non-LED applications, and expects to return to profitability during 2013. Aixtron is also expecting to gain further traction in emerging MOCVD non-LED applications and other technology markets, including silicon semiconductor, power electronics and organic semiconductor applications.

Following the company’s announcements of its Q3 results and revised 2012 forecast, president & CEO Paul Hyland and executive VP & chief financial officer Wolfgang Breme made some further comments to the subsequent press conference about the firm’s recent performance, prospects and the wider market conditions affecting Aixtron and other similar manufacturers.